Yes, debt to GDP is high now. Debt to GDP has taken off because tax receipts have collapsed due to the collapse in the economy.

But what does the debt/GDP mean for the real economy? Not much. Long-term interest rates are low - around 4% - http://www.ustreas.g...positeindex.shtml People aren't afraid to lend the US money. Inflation is low and falling. Disinflation is here and deflation is a looming threat - http://krugman.blogs...-deflation-japan/

Just pointing at the raw stimulus plans or the raw debt without looking at the collapse in the private economy doesn't show the full picture. Even with the TARP and all of the money that the Fed and the Treasury dumped into the banking system, that didn't come close to filling the hole caused by the financial crisis and the Great Recession. The US didn't do enough to come close to causing future inflation. It barely did enough to do more than stop the free-fall.

Unless the economy starts growing quickly enough to bring unemployment down reasonably quickly, millions of skilled workers are going to be permanently unemployed. This will be a permanent drag on the economy, and permanently reduce GDP and tax revenue.

Running large deficits is the only way to get the economy growing after the financial crisis. Demand fell off a cliff and people lost too much wealth and income to drive the recovery. The government is the only thing that can get the economy growing.

I know you disagree. But your side has been "concerned" about inflation for ages. When a Democrat takes the presidency, suddenly the "concern" is about the deficits and the debt. Your side needs to explain how the US can run huge deficits for 8+ years and yet inflation and interest rates can keep falling. Uncle Milton would have said that's impossible.

Inflation and interest rates will rise when the economy is growing fast enough that there's competition for funds. As long as the world economy is limping along with weak banks and high unemployment, that isn't going to happen.

But what about when the economy does grow again? Won't that mean 10+% inflation and 10+% interest rates due to all the debt? History says otherwise. Debt to GDP was over 120% after WWII - http://zfacts.com/p/318.html . Inflation briefly hit 15% post-war, but rapidly dropped below 5% (except for a blip in ~1951) - http://www.gocurrenc...ies-inflation.htm Debt/GDP continued to slowly drop until the mid-1970s. Growth will solve the debt/GDP "problem".

Bottom line: The most important issue in the economy now is high unemployment - not debt/GDP, not deficits, not government spending. Arguments about "offsets" for emergency spending for unemployment benefits are stupid and counterproductive because the whole point of unemployment benefits is to keep money flowing to people so that the economy doesn't collapse further. Offsets would defeat the purpose.

Cutting spending in a weak recovery is what lengthened and deepened the Great Depression.

If starting a war was the solution, the 2000s would have been a boom-time. Instead, about $1T went down the drain. :-(

Long term, the deficit is a problem. That's why one should run a surplus during boom times - to manage the public debt and to be able to run temporary deficits in recessions. But your friends who are "concerned" now don't believe that bit of elementary macroeconomics either - it gets in the way of their "tax cuts solve everything" mantra.

(The biggest long-term driver for the US deficit is rising health care costs. Not Social Security, not the bailouts, not interest on the debt.)

My $0.02.

Cheers,
Scott.

Your first excerpt says the deficit is larger than under Bush. How does that contradict my stating that the Debt/GDP ratio has ballooned because the economy imploded and cut tax revenue substantially?

Your second excerpt doesn't talk about debt/GDP either.

The CBO also says:
http://cboblog.cbo.gov/?p=1034

The central challenge is straightforward and stark: The rising costs of health care will put tremendous pressure on the federal budget during the next few decades and beyond.

Which is what I said. Over the Long Term the budget needs to come closer to balance, which means increases in health care costs have to be reduced to something approaching GDP growth.

The deficit to GDP ratio is projected to drop substantially over the next few years - http://www.whitehous...sets/hist01z2.xls (31 kB):

Year - GDP ($B) - Receipts (% of GDP) - Outlays (% of GDP) - Deficit (% of GDP)

1980 2,724.2 19.0 21.7 -2.7
1981 3,057.0 19.6 22.2 -2.6
1982 3,223.7 19.2 23.1 -4.0
1983 3,440.7 17.5 23.5 -6.0
1984 3,844.4 17.3 22.2 -4.8
1985 4,146.3 17.7 22.8 -5.1
1986 4,403.9 17.5 22.5 -5.0
1987 4,651.4 18.4 21.6 -3.2
1988 5,008.5 18.2 21.3 -3.1
1989 5,399.5 18.4 21.2 -2.8
1990 5,734.5 18.0 21.9 -3.9
1991 5,930.5 17.8 22.3 -4.5
1992 6,242.0 17.5 22.1 -4.7
1993 6,587.3 17.5 21.4 -3.9
1994 6,976.6 18.0 21.0 -2.9
1995 7,341.1 18.4 20.6 -2.2
1996 7,718.3 18.8 20.2 -1.4
1997 8,211.7 19.2 19.5 -0.3
1998 8,663.0 19.9 19.1 0.8
1999 9,208.4 19.8 18.5 1.4
2000 9,821.0 20.6 18.2 2.4
2001 10,225.3 19.5 18.2 1.3
2002 10,543.9 17.6 19.1 -1.5
2003 10,979.8 16.2 19.7 -3.4
2004 11,685.6 16.1 19.6 -3.5
2005 12,445.7 17.3 19.9 -2.6
2006 13,224.9 18.2 20.1 -1.9
2007 13,896.0 18.5 19.6 -1.2
2008 14,439.0 17.5 20.7 -3.2
2009 14,237.2 14.8 24.7 -9.9
2010 estimate 14,623.9 14.8 25.4 -10.6
2011 estimate 15,299.0 16.8 25.1 -8.3
2012 estimate 16,203.3 18.1 23.2 -5.1
2013 estimate 17,182.2 18.6 22.8 -4.2
2014 estimate 18,192.6 19.0 22.9 -3.9
2015 estimate 19,190.4 18.9 22.9 -3.9

The deficit to GDP ratio will fall substantially over the next few years, even with large deficits in dollar terms. Yes, the total debt will go up over the next few years, but most of the jump was due to the implosion of the economy as a result of Bush's policies - http://www.whitehous...sets/hist07z1.xls .

Finally, once we're mostly out of Iraq and Afghanistan, and once we fully implement things as outlined here - http://www.whitehouse.gov/issues/fiscal - the deficit will fall still further.

Now show me how your apparent concern about Debt/GDP is more valid than that of people who are willing to get 4% from the US treasury on a 20 year bond - http://www.ustreas.g...positeindex.shtml ? The market says it's not a problem. People who are willing to put their money where their mouth is don't seem to be worried; otherwise they'd be demanding higher rates for long bonds.

Box mentioned unemployment. Yes, it's too high. But remember this graph: http://www.washingto...010_04/023170.php

Try again?

Thanks.

Cheers,
Scott.